The Shirt Shop had the following transactions for T-shirts for 2016, its first year of operations:

During the year, The Shirt Shop sold 810 T-shirts for $30 each.
Required
a. Compute the amount of ending inventory The Shirt Shop would report on the balance sheet, assuming the following cost flow assumptions:
(1) FIFO,
(2) LIFO, and
(3) Weighted average.
b. Record the above transactions in general journal form and post to T-accounts assuming
(1) FIFO,
(2) LIFO, and
(3) Weighted average methods.
Use a separate set of journal entries and T-accounts for each method. Assume all transactions are cash transactions.
c. Compute the difference in gross margin between the FIFO and LIFO cost flow assumptions.

Transcribed Image Text:

Jan. 20 Apr. 21 July 25 Sept. 19 Purchased 400 units$8 $3,200 2,000 3,640 $15 1,350 Purchased 200 units @ $10 Purchased 280 units $13 Purchased 90 units